For nearly four decades, sports owners have feasted on cable TV revenue.
It has been a great ride for Major League Baseball, the National Basketball Association and the National Hockey League but it appears the great cable TV gravy train is coming to a stop. The cord cutters, the people who are dropping cable and satellite TV, are beginning to impact the cable TV revenue stream for teams and replacing that money is not going to be easy. You have to go back to the 1980s when cable television was struggling financially when cable television got a huge gift from the American government. In 1984, Congress and President Ronald Reagan changed the rules and created what was in effect cable TV consumer socialism and tiering. Tier one was basic and gave consumers all of the local stations in the market but tier two or basic expanded was where money was to be made. Struggling ESPN became profitable as everyone who wanted basic extended cable had to take ESPN whether the customer watched the programming or not. Regional sports cable networks started and teams all of a sudden had a new money source which the players noticed. Salaries started to increase. The most expensive programming on cable TV is the presentation of games and customers pay high monthly fees for games whether they watch the programming or not.
Major League Baseball Commissioner Rob Manfred has acknowledged that the Reagan Administration gave sports a great present. “It’s a great business model when a whole bunch of people pay for something they don’t really care if they have or not, which is what the cable bundle did for us. It’s hard to replicate that.” It will be hard to replicate. How much will consumers pay for streaming services? That is a great unknown. But that may be playing out with the Sinclair owned bankrupt Bally Sports regional cable TV networks and that’s a problem.
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